The Italian Legislative Decree no. 207 of 7 December 2023 supplemented the Italian Consolidated Banking Act with article 118-bis which, in accordance with Regulation (EU) 2016/1011 (the “Benchmark Regulation”), regulates how banks and financial intermediaries shall implement the plans provided for in article 28, paragraph 2 of the Benchmark Regulation (the “Plans”) in case of material change (i.e., a relevant change of the methodology applied for the calculation of the benchmark) or termination (either temporary or permanent) of a benchmark[1] provided in a facility agreement, or in connection with the provision of payment services, for determining an amount to be paid (in particular, the applicable interest rate) or the value of a financial instrument or for measuring the performance of investment funds.
The new article 118-bis aims to provide a mechanism for the adjustment of certain contractual clauses, according to predetermined criteria, for the replacement of a benchmark in the event such benchmark latter materially changes or ceases to be provided, for the purposes of preserving the performance of the agreement and the validity of the relevant contractual provisions.
- Content of the discipline:
Article 118-bis of TUB provides with specific obligations for banks and intermediaries, and in particular:
a) the obligation to publish, also through excerpts, and keep updated the Plans on their websites, as well as to bring the relevant updates to the attention of the clients at least once a year or at the earliest opportunity;
b) the obligation to include in the agreements with the clients (either new or existing) fallback clauses, e., clauses that allow to identify, also through referral to the Plans, the changes to the benchmark or the replacement benchmark in case the benchmark applied to the agreement materially changes or ceases to be provided;
c) the obligation to notify to the clients, within thirty days from the occurred material change or termination of the benchmark applied to the agreement, the relevant changes or the replacement benchmark through the application of the fallback clauses.
The clients shall be entitled to withdraw from the agreement in the two months following receipt of the notice and, in such case, the conditions previously applied, including the interest rate, shall be applied at the time of termination of the agreement. If a client chooses not to exercise such right, the changes to the agreement shall be deemed automatically as approved.
In addition to the above, article 118-bis of TUB provides that:
a) the changes or the replacements of the benchmark made in breach of the above-mentioned obligations are ineffective, and
b) the right of unilateral change of the contractual conditions set forth by article 118 of TUB is not applicable with respect to the case at hand.
- Scope:
The provisions set forth by article 118-bis of TUB apply to all the agreements governed by Title VI of TUB, i.e., the agreements relating to any financial and banking service subject to the banking transparency rules, including, therefore, to the corporate lending, the consumer credit, as well as payment services provide by payment and electronic money institutions.
- Application:
The banks and the intermediaries shall comply with the provisions introduced by article 118-bis of TUB within 10 January 2025.
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[1] Meaning “any index by reference to which the amount payable under a financial instrument or a financial contract, or the value of a financial instrument, is determined, or an index that is used to measure the performance of an investment fund with the purpose of tracking the return of such index or of defining the asset allocation of a portfolio or of computing the performance fees” (article 3, paragraph 1, no. 3) of the Benchmark Regulation).